On December 13, 2016, the IRS issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning January 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 53.5 cents per mile for business miles driven (down from 54 cents in 2016).
- 17 cents per mile driven for medical or moving purposes (down from 19 cents in 2016).
- 14 cents per mile driven in service of charitable organizations (same as 2016).
The standard mileage rate for business is to cover the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
Employees always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Reimbursement for Employee’s Use of Personal Vehicle
California Labor Code Section 2802 provides that employers must fully reimburse employees for all expenses actually and necessarily incurred in the performance of their job duties. Part of that reimbursement is for the use of the employee’s vehicle.
The Division of Labor Standards Enforcement has stated that using the IRS mileage rate will generally satisfy an employer’s obligation to reimburse for business related vehicle expenses, absent evidence to the contrary.
If an employee can show that the chosen mileage reimbursement rate, even the IRS rate, does not cover all actual expenses the employee has incurred, the employer must pay the difference.
What Should I Do Now
- Review your payroll practices to ensure that all employees (exempt and non-exempt) are reimbursed at the IRS mileage rate for the use of their vehicle
- Have employees submit a mileage log for the business use of their personal vehicles and confirm if the employee wishes to accept the IRS rate or if the employee intends to submit a claim that the employer’s reimbursement rate does not cover all actual expenses.
- Provide reimbursement of the expenses within a reasonable period of time from the time the employee incurred the expense.